Russians launch mega share floats in London

Major Russian companies are still demonstrating a preference for floating shares on foreign exchanges, despite the efforts of Russian authorities to turn the country into a global financial center and make the Micex-RTS exchange more appealing to invest

Telecoms giant MegaFon recently sold 20 percent of its stock for $4 bln on the London Stock Exchange, adding the firm to a growing list of home-grown morsels Russian markets will miss out on.

Six of London’s 10 biggest share floats last year were by Russian firms, raising a total of $3.7 bln, compared with $206 mln in Moscow-based IPOs (source: Bloomberg data).

Nord Capital’s Vladimir Rozhankovsky sees some sense in the strategy. “There’s nothing new in major Russian companies’ lust for foreign platforms to float their shares. They prefer well-established US and European markets with large pool of investors, something Russia is still lacking. Russian markets are heavily relying on non-resident investment money. With the state pension fund not allowed to invest in assets, domestic institutional investors, including non-governmental pension funds …put insignificant part of their assets in local equity markets.”

Russia’s largest gold producer, Polyus Gold, is also making itself more comfortable in London.

Polyus opened a bid book for a Secondary Public Offering to raise its share free-float to 25 percent from 14.5 percent in late April, to get a premium listing on the London Stock Exchange.

Currently only 22 percent of Polyus shares are freely traded. JP Morgan Cazenove is representing the gold company’s in talks with the UK Listing Authority over the premium listing and cites Polyus's $10 bln market capitalization.

The combined value of shares traded in the U.K. was $3.3 trln as of May 7, compared with $807 bln in Russia, according to Bloomberg.

Last year Evraz, Russia’s largest steelmaker by output, and precious metals miner Polymetal, became the first Russian companies to join the FTSE 100 index after switching their main listings to London in November.

In April Russian Machines, a Moscow-based manufacturer controlled by billionaire Oleg Deripaska, announced plans to raise as much as $3 bln by selling a minority stake in overseas markets.

Moscow’s hopes are not lost however. Analysts believe that the number of share floats by Russian companies will increase only if a state backed privatization programme adopted in 2010 gains momentum.